Andy Higgins, MD of e-commerce solutions company Bob Group, said criticism of Amazon’s May launch in South Africa is largely based on media hype and the inflated expectations of consumers who have experienced Amazon in other markets.
“As far as I am aware, nowhere did Amazon South Africa themselves create any hype; in fact, I think they downplayed it,” Higgins told the TechCentral Show in an interview to be published this week.
“External parties created that expectation. If you look at where Amazon has launched in other markets, I don’t think they have gone with fanfare – there is no reason they should be any different in South Africa,” he said.
According to Higgins, Amazon’s biggest challenge in South Africa likely relates to the complexity of the logistics infrastructure. He said Amazon is competing with a sophisticated incumbent in Naspers-owned Takealot Group, which has deep knowledge of South Africa’s logistics landscape and also owns a fulfilment network through Mr D. Amazon South Africa, on the other hand, uses third parties for its logistics.
Another driver that Higgins believes fuelled hype around the Amazon South Africa launch was related to people’s experiences with other international digital businesses such as Google and Netflix, which very quickly dominated their respective markets locally.
Higgins said the same cannot happen in e-commerce because it is fundamentally different. “Those services are purely digital, whereas here when we talk e-commerce – for the most part – there is a physical product involved, which adds much more complexity to the process.”
Challenges
He said he suspects the reason Amazon South Africa launched without any Amazon-branded products – no Echo smart speakers or Kindle e-readers are available for purchase on amazon.co.za – also relates to logistical challenges of carrying and supporting those devices to the standard the market expects.
“These [products] will come in time, but it may take longer than people expect. I think one of the challenges Amazon will have is having to fit into software and a system that has been built for other markets. It will be difficult to get customisations made to how the system works for South Africa, which makes up a fraction of their business. I can foresee challenges in getting that right,” said Higgins.
Read: Amazon Prime is coming to South Africa – what to expect
Speculation about Amazon’s entry into local retail operations began in 2022, but it was only in October 2023 that the online shopping giant confirmed its intention to launch a marketplace operation in South Africa. In May 2024, amazon.co.za went live with little fanfare.
Much of the anticipation leading up to Amazon’s South African launch was off the back of its Prime service, which the company had said it would launch here.
In the US, Prime membership – which costs US$14.99/month or $139/year – includes shipping benefits, with free two-day shipping on qualifying items as standard. No minimum purchase amount is required, so even a single low-priced item costing only a few dollars will be delivered free of charge.
“There are many aspects to operating profitably in the e-commerce space, but I think logistics is the most important. In other markets Amazon has built its own logistics infrastructure, which could happen in South Africa. I think it’s a long way off, though,” said Higgins. – © 2024 NewsCentral Media
